Crescent Point Energy Corp. (TSE:CPG) will increase its dividend from last year's comparable payment on the 3rd of October to CA$0.08. Despite this raise, the dividend yield of 2.6% is only a modest boost to shareholder returns.
Crescent Point Energy's Dividend Is Well Covered By Earnings
If it is predictable over a long period, even low dividend yields can be attractive. However, Crescent Point Energy's earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.
Over the next year, EPS is forecast to fall by 28.1%. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 4.6%, which is comfortable for the company to continue in the future.
Although the company has a long dividend history, it has been cut at least once in the last 10 years. The dividend has gone from an annual total of CA$2.76 in 2012 to the most recent total annual payment of CA$0.26. The dividend has fallen 91% over that period. Generally, we don't like to see a dividend that has been declining over time as this can degrade shareholders' returns and indicate that the company may be running into problems.
The Dividend Looks Likely To Grow
Dividends have been going in the wrong direction, so we definitely want to see a different trend in the earnings per share. It's encouraging to see that Crescent Point Energy has been growing its earnings per share at 29% a year over the past five years. Earnings have been growing rapidly, and with a low payout ratio we think that the company could turn out to be a great dividend stock.
Crescent Point Energy Looks Like A Great Dividend Stock
In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The earnings easily cover the company's distributions, and the company is generating plenty of cash. If earnings do fall over the next 12 months, the dividend could be buffeted a little bit, but we don't think it should cause too much of a problem in the long term. All in all, this checks a lot of the boxes we look for when choosing an income stock.
Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Crescent Point Energy has 4 warning signs (and 1 which is concerning) we think you should know about. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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